Providing benefits in addition to regular wages or salary is a common way for employers to remunerate their employees. Benefits are goods, services, concessions, allowances or other privileges provided to employees, in addition to wages or salary.

One increasingly common type of employment benefit is providing employees with shares, share rights or options in the employer's business. A share right, or option, is a contractual right to acquire shares in the future, at a set price. The shares are issued when the employee exercises this right to the shares.

These arrangements, where employees receive shares (including share rights or options) in the employer's business as an employment benefit, are often referred to as 'employee share schemes'.

Employee share schemes are designed to encourage employees to invest in the business they work in, both financially and in terms of increased commitment. The schemes provide a link between corporate and individual performance and can therefore provide extra motivation for employees. Employee share schemes are therefore considered to benefit both the employer and the employee.

This article uses estimates from the Survey of Employee Earnings, Benefits and Trade Union Membership to show how the incidence of employees receiving shares as an employment benefit has increased over time. It then looks at the characteristics of employees who received shares as an employment benefit in August 2004.

EMPLOYEES RECEIVING SHARES AS AN EMPLOYMENT BENEFIT

Over the last twenty-five years it has become more common for employers to provide shares as an employment benefit. In 1979, the proportion of employees who received shares as an employment benefit was 1.3%, but by 2004 this had increased to 5.9% of employees. Most of the increase occurred between 1989 and 1999, with the proportion increasing from 2.4% to 5.5% during this period.

1. Proportion of employees receiving shares

CHARACTERISTICS OF EMPLOYEES RECEIVING SHARES AS AN EMPLOYMENT BENEFIT

In August 2004, 299,000 male employees and 182,300 female employees received shares as an employment benefit in their main job. This represents 6.9% of all male employees and 4.8% of all female employees. A higher proportion of full-time employees received shares as an employment benefit than part-time employees (7.0% compared to 3.4%).

2. Employees receiving shares as an employment benefit - August 2004

Males

Females

Persons

%

%

%

Full-time

7.8

5.6

7.0

Part-time

2.0

3.9

3.4

Total

6.9

4.8

5.9

The proportion of employees who received shares as an employment benefit was higher for trade union members than employees who were not trade union members (8.5% compared to 5.3%). It was also higher for owner managers of incorporated enterprises than other employees (12.0% compared to 5.4%).

The proportion of employees receiving shares as an employment benefit also varied across industries and occupations.

Industry

The Finance and insurance industry had the highest proportion of employees who received shares as an employment benefit (32%), followed by Mining (16%) and Communication services (16%). While only 4% of employees worked in Finance and insurance, this industry accounted for 21% of all employees who received shares as an employment benefit.

The proportions of employees in the Mining and Communication services industries who received shares as an employment benefit were also relatively high (16% in each), yet these industries only accounted for 3% and 5% of all employees who received shares as an employment benefit. In contrast, only 8% of employees in Manufacturing received shares as an employment benefit, yet this industry accounted for 16% of all employees who received shares as employment benefit.

The occupations with the highest proportions of employees who received shares as an employment benefit were Managers and administrators (12%), Advanced clerical and service workers (11%) and Associate professionals (8%). While only 7% of all employees were in the Managers and administrators group, this group accounted for 14% of all employees who received shares as an employment benefit.

Employees who receive shares as an employment benefit generally have higher earnings than those who do not receive shares as an employment benefit. This reflects the high proportion of employees receiving shares in industries where employees have high earnings (i.e. Finance and insurance, and Mining). Mean weekly earnings in main job (excluding the value of benefits) of employees who received shares as an employment benefit were 49% higher than those who did not receive shares ($1,096 compared to $737).

The correlation between mean weekly earnings and the receipt of shares as an employment benefit can also be seen when looking at earnings ranges. The proportion of employees who received shares as an employment benefit was highest for employees with weekly earnings of $2,000 and over, and lowest for employees with weekly earnings of under $200.

5. Proportion of employees receiving shares, By earnings ranges in main job - August 2004

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